Starting a business in India: Complete setup guide 2026

Business setup in India begins with one decision that quietly shapes everything after it: which legal structure you choose.

Choose well and you pay Indian corporate tax rates with the freedom to run your business. Choose badly and you can be taxed at 35%, or find you are legally barred from invoicing your own customers.

This guide answers exactly that question. Not the filing steps, and not whether India is the right market, just the structure decision, made properly.

Its companions cover the rest: expanding your business to India for the market-entry decision, company registration in India for the forms, documents and filing process, and doing business in India for how tax, GST and compliance work once you are running.

What are your structure options for setting up in India?

You have five, and they are not interchangeable. Two are Indian entities you own outright; the other three are extensions of your foreign company operating in India under Reserve Bank permission. That split drives both your tax rate and what you are allowed to do, and it bites harder here than in a typical entity decision.

In practice, most foreign companies incorporate a wholly owned subsidiary, and a good number run an EOR first and incorporate later. The other four serve narrower needs, and two of them carry restrictions that routinely catch buyers out.

Before those restrictions, look again at the tax column, because that is where the choice hits your numbers hardest.

How does your structure change the tax you pay?

By roughly ten percentage points, which is enough to settle the question on its own and worth weighing against your broader India operating model. An Indian subsidiary counts as a domestic company for tax. A branch or project office is your foreign company earning Indian income, and India taxes that at a higher rate.

• Subsidiary: it can elect the 22% domestic rate, which works out near 25% effective after the 10% surcharge and 4% cess, in exchange for giving up certain deductions.
• Branch or project office: taxed as a foreign company at 35%, plus a 2% or 5% surcharge by income band and 4% cess, which lands around 36% to 38% effective, down from the old 40% rate.
• Liaison office: pays no tax on income, but only because it is barred from earning any. It still files annual returns and reports.

If you expect India to turn a profit, the tax gap between a subsidiary and a branch usually outweighs the extra incorporation effort inside the first year or two. That is the whole argument in one line.

There is more to the tax picture once you are actually trading, from GST to withholding to how you repatriate profit. That belongs in doing business in India, not here.

Tax is one half of the decision. What each structure is permitted to do is the other, and it is where liaison offices let people down.

What is each structure actually allowed to do in India?

This is the part that decides whether a structure is usable at all, and the limits are real rather than theoretical. Cross them and you can also create permanent establishment exposure. A liaison office in particular is far more restricted than its name suggests.

Liaison office: representation only

It can represent your parent, promote your business, gather market intelligence and act as a communication channel. It cannot earn income, invoice customers or trade, and it survives entirely on money wired from the parent.

Useful for testing a market. Useless the moment you want to sell anything.

Branch office: commercial, but not manufacturing

A branch can trade, deliver services, run research and handle wholesale activity, and it can earn income and remit profit. The one thing it cannot do is manufacture in India directly.

Project office: one contract, then it ends

You set it up to deliver one specific awarded contract, and its life is tied to that project. It is the right call for a single infrastructure or delivery engagement, often staffed on fixed-term contracts, and the wrong call for building an ongoing India business.

Subsidiary and LLP: no activity ceiling

An Indian company can do whatever an Indian company can do, within sector rules and the legal requirements for hiring in India. That freedom, plus the lower tax rate, is why it is the default. An LLP is available too, though foreign investment into one comes with conditions.

Knowing what you want to do narrows the list fast. The next filter is who has to sign off on it.

Which structures need Reserve Bank approval?

All three foreign-company presences do. Indian entities usually do not, because most sectors sit on the automatic FDI route where you invest first and report afterwards. Tax registrations such as GST follow separately once you are incorporated.

The full registration and FEMA reporting sequence a foreign-owned entity clears, from SPICe+ incorporation on the MCA portal to the FC-GPR filing, is laid out in our guide to the legal and regulatory framework for an India entity.

• Subsidiary or LLP: incorporate with the Ministry of Corporate Affairs, then report the investment to the Reserve Bank. No prior permission in automatic-route sectors, which is most of the economy.
• Liaison, branch or project office: apply through an authorised dealer bank to the Reserve Bank under India's foreign exchange rules. This is a permission process, not a registration, so it takes longer.
• Two things force the government route: a restricted sector, or an investor from a country that shares a land border with India. Check your whole ownership chain, not just your own domicile.

Approval settled, the next question is what all this costs and how long it takes.

How long does business setup in India take, and what does it cost?

Incorporating is a matter of weeks; standing up a full operation is a matter of months. Our published India figures put entity setup at $15,000 to $40,000 one-time for a 50-person operation, with a full wholly owned subsidiary running three to six months end to end.

Those are ranges, not quotes, and professional fees swing widely by city and adviser.

For the itemised filing steps and the document list behind the timeline, see company registration in India.

Registration itself is the smaller number. Here is what the paperwork costs and how long each route takes, as market ranges rather than quotes.

Those cover formation only. Office space, an audit, a company secretary and the monthly filing cadence stack on top, which is where the $15,000 figure comes from.

Three costs sit outside the setup fee and never stop: an annual audit, ongoing registrar and tax filings, and someone competent to own the monthly statutory compliance cadence.

Set against the cost of hiring in India, that overhead raises a fair question, and it is worth asking before you spend a rupee of the setup money.

Planning more than a single team? If you are standing up a captive unit at that 50-person scale, our guide to building a global capability center in India breaks down the operating model, hiring and run-state cost.

Do you actually need an entity in India yet?

Often you do not. If your reason for setting up is to employ people rather than to sell into the Indian market, you can hire employees in India without an entity through an Employer of Record, which becomes the legal employer while you direct the work.

The honest test is what you are actually trying to do. If the answer is mostly hiring in India, an entity may be premature:

• Selling, licensing or raising capital locally: you need an entity, and a subsidiary is almost certainly it.
• Building a team for your global business: an EOR is usually faster and cheaper until headcount justifies the overhead. Weigh the two properly in EOR vs entity in India.
• Not sure yet: start on an EOR and convert later. Moving from an EOR to your own entity is a well-worn path, and far easier than unwinding an entity you never needed.

A rough crossover: most companies stay on an EOR until India headcount passes about 20, then incorporate. Our EOR versus entity calculator puts both on the same monthly basis so you can see where your own line sits.

So where does that leave you if hiring is the whole reason you are here?

How does Wisemonk help you set up in India?

Wisemonk is an India-specialist Employer of Record. We help global companies hire, pay and manage employees in India, and we handle the compliance work behind every payroll cycle, whether you end up with your own entity or not.

More than 300 global clients work with us, we manage over 2,000 employees, we run $20M+ in annual payroll, and we hold a 4.8 out of 5 on G2 across verified customer reviews. EOR pricing starts from $99 per employee per month.

Here is how we help across the India setup, from your first hire to your own entity:

• Employer of Record: we become the legal employer in India, so you hire and run your team with no entity and no misclassification risk.
• Entity setup: when you want your own Indian company, we handle incorporation and the tax and employer registrations.
• GCC setup: stand up and staff a full India capability centre, from operating model to run-state.
• Managed payroll: monthly pay runs with PF, ESI, TDS and the other statutory filings handled on schedule.
• PEO: already hold an Indian entity? We run payroll and compliance under your own registrations.
• Recruitment and Mira AI: source and screen candidates against your scorecard, then employ the ones you pick.
• Background checks: identity, education, employment and criminal verification before a start date.
• Contractor of Record: engage project and specialist talent compliantly, with agreements, IP assignment and local payouts.
• Freelancer and vendor payments: pay Indian freelancers, consultants and vendors through approved channels, with FIRA documentation.
• Build-Operate-Transfer: we build and run your India team, then transfer it to your own entity when you are ready.

We provide EOR services in India, and we are expanding into the US and UK markets.

Red Hill Technology Solutions has run its India engineering team on Wisemonk for the past year and a half. They handle payroll and benefits end to end, so I can offer my employees good health insurance without having to master the idiosyncrasies of Indian benefits myself. Payroll cutoff reminders arrive every month before I need them, and off-cycle bonus runs have never been a problem. Even equipment purchasing, a real headache for a US company shipping to Indian addresses, is as simple as telling them what I need. Exchange rates are fair and the pricing is transparent. Deepika Elumalai, our point of contact, ties it all together. Whatever comes up, she pulls in the right people and sees it through. For any US company building a team in India, Wisemonk is an easy recommendation.
- Tak Yamamoto, President at Red Hill Technology Solutions, Inc.
(Read the full case study)